Consumer spending weak in February

WASHINGTON (AP) Consumers turned in the weakest spending performance in 17 months in February, while their confidence dropped to the lowest level in 16 years, raising further fears of a recession.

The Commerce Department said Friday that consumer spending edged up by just 0.1 percent last month, the poorest showing since September 2006. And if the effects of inflation are removed, spending was flat in February, the third consecutive month of sluggish activity.

Meanwhile, a second report showed the prolonged slump in housing, rising job layoffs, soaring energy costs and a severe credit crisis are taking their toll on consumer confidence. The Reuters/University of Michigan consumer sentiment survey dropped to 69.5 in March.

That was down from 70.8 in February and represented the lowest reading in 16 years, which analysts said was not surprising given all the problems battering households presently.

J.C. Penney slashes 1Q profit forecast

PLANO, Texas (AP) J.C. Penney, whose stores help anchor hundreds of malls across the country, delivered fresh evidence Friday that the economy is faltering in the face of higher gasoline prices and lower consumer confidence.

The department store chain warned that first-quarter profits will be one-third lower than Wall Street expected, sending its shares tumbling nearly 14 percent at one point. The stock of other retailers dropped as well.

Chief Executive Myron Ullman said higher energy costs, a drop in hiring and weak housing and credit markets were weighing consumers down.

The company said it now expects first-quarter net income of about 50 cents per share, down from its earlier forecast for a profit of 75 cents to 80 cents per share. Analysts had been expecting 75 cents per share, according to a survey by Thomson Financial.

Wall Street closes week slightly lower

NEW YORK (AP) Wall Street finished the week with a decline Friday as the financial health of the consumer came into focus following a report that showed personal spending at its weakest growth in 17 months and a profit warning from J.C. Penney Co.

After weeks of concentrating on credit problems and interest rates, the market was forced to pay attention to the consumers who drive economic growth. The Commerce Department said consumer spending ticked up a paltry 0.1 percent last month, in line with Wall Street's expectations. But that news and the profit warning from J.C. Penney raised concerns about the well-being of consumers.

The market felt some relief after the government said an important inflation gauge tied to consumer spending rose only 0.1 percent when excluding often-volatile energy and food costs.

Trading was fairly muted following days of volatility that sent stocks sharply higher early in the week and then plunging near the end. Investors were able to set aside some concerns about the effects of the credit crisis on the financial sector, but that gave them more time to think about the economy.

Fed offers $100 billion more to banks

WASHINGTON (AP) The Federal Reserve announced Friday it will auction another $100 billion in April to cash-strapped banks as it continues to combat the effects of a credit crisis.

The central bank said it would make $50 billion available at each of two auctions, on April 7 and April 21.

Through the end of March, the Fed has provided $260 billion in short-term loans to commercial banks through the innovative auction process. It also has employed Depression-era provisions to provide money to investment banks.

All the moves have been designed to cope with a serious financial crisis that has roiled U.S. and global markets and caused the near-collapse of Bear Stearns Cos., the nation's fifth largest investment bank.

Malware cited in supermarket data breach

PORTLAND, Maine (AP) Unauthorized software that was secretly installed on servers in Hannaford Bros. Co.'s supermarkets across the Northeast and in Florida enabled the massive data breach that compromised up to 4.2 million credit and debit cards, the company said Friday.

The Scarborough, Maine-based grocer confirmed a report in The Boston Globe that it told Massachusetts regulators this week about the link between the breach and the illicit programs, known as "malware."

At least 1,800 cases of fraud have been linked to the data breach, with unauthorized charges showing up as far afield as Mexico, Italy and Bulgaria.

The breach has prompted concern in the industry because it appeared to be the first large-scale theft of credit and debit card numbers while the information was in transit.

The usual mode of attack targets data sitting in databases, as in the record-setting theft of information from Massachusetts-based TJX Cos. involving least 45 million card numbers belonging to customers of T.J. Maxx and Marshalls stores.

KB Home posts big loss for 1Q

LOS ANGELES (AP) KB Home, one of the nation's biggest residential homebuilders, said Friday it posted a loss of more than $268 million in its first quarter as weak home sales amid a worsening housing market forced the company to take a large write-down related to falling home prices.

Its shares fell nearly 5 percent Friday.

Jeffrey Mezger, KB Home's president and chief executive, said a growing supply of unsold new and existing homes on the market, tight mortgage lending and industrywide discounting drove down sale prices and compressed margins during the quarter.

That forced the builder to take impairment charges and walk away from land option contracts.

Clear Channel says deal may not close

SAN ANTONIO (AP) The lenders committed to financing the $19.5 billion private buyout of Clear Channel Communications Inc. didn't show up to a meeting of the company and buyers even after a judge issued an order barring the banks from hindering or undermining the deal, the company said in a filing Friday.

Representatives from Clear Channel and the private equity buyers, led by Bain Capital and Thomas H. Lee LLC, met Thursday the day after a temporary restraining order was issued to bar the banks from purposely sinking the deal. It was also the day previously set for the closing of the buyout.

But the lenders didn't show, and Clear Channel said in a filing with the Securities and Exchange Commission that "the company continues to be ready, willing and able to consummate the merger The company is unable, however, to estimate a closing date at this time and cautions the markets that a closing may not occur."

Clear Channel shares, which have been volatile in recent weeks, fell 40 cents, or 1.4 percent, to close at $29.20 Friday.

Oil drops as Iraq supply fears ebb

NEW YORK (AP) Oil futures pulled back sharply Friday after fears of a major disruption of Iraqi crude exports dissipated. A stronger dollar also lessened investors' appetite for crude.

At the pump, meanwhile, retail gas prices rose closer to record levels, while diesel prices extended their slide.

In Iraq, a key oil export pipeline that was bombed Thursday was repaired Friday, Dow Jones Newswires reported. Word of the explosion had raised concerns that Iraqi exports would fall sharply and sent oil prices surging higher.

Meanwhile, the dollar strengthened against the euro, making oil and other commodities less appealing as a hedge against inflation. A stronger dollar also makes oil more expensive to overseas investors.

Airlines lighten up to cut fuel costs

PHOENIX (AP) Your ginger-ale doesn't come in a glass anymore on most US Airways flights. On Delta you'll find yourself in a thinner, lighter seat. If you fly JetBlue cross-country, you'll get a dainty bag of 100-calorie crisps in place of the original snack box of cookies, crackers and spreadable cheese.

With jet fuel prices so high, airlines have no choice but to scour their planes for ways to lighten the load. There's no room for even the smallest bits of dead weight, from redundant wing lights to extra wires in the walls. Manufacturers also are using lighter materials in plane construction.

Jet fuel, which the Energy Department's Energy Information Administration tracked at $3.17 per gallon in New York on Tuesday, has doubled since the beginning of 2007. It outpaced labor as the biggest airline expense three years ago. As of September 2007, fuel made up 27 percent of operating expenses for U.S. airlines, according to the latest data from the Bureau of Transportation Statistics.

By The Associated Press

The Dow Jones industrial average fell 86.06, or 0.70 percent, to 12,216.40, suffering its third straight decline.

Broader stock indicators slipped. The Standard & Poor's 500 index fell 10.54, or 0.80 percent, to 1,315.22, and the Nasdaq composite index fell 19.65, or 0.86 percent, to 2,261.18.

Light, sweet crude for May delivery fell $1.96 to settle at $105.62 a barrel Friday on the New York Mercantile Exchange. Over the previous three days, oil prices rose $6.72, or 6.6 percent.

Other energy futures on the Nymex were mixed Friday. April heating oil futures fell 4.33 cents to settle at $3.105 a gallon while April gasoline futures edged 0.07 cent higher to settle at $2.717 a gallon.

May natural gas futures rose 11.3 cents to settle at $9.80 per 1,000 cubic feet.

Brent crude futures slipped $1.23 to settle at $103.77 a barrel on the ICE Futures exchange in London.

Copyright 2008 The Associated Press.